Affordable Care Act's excise tax that starts in 2018 should be called the
“Camry” tax—not the “Cadillac” tax—because it is going to affect more than just
high-cost plans, a practitioner said at a conference on employee benefits.
excise tax under tax code Section 4980I is pegged to the Consumer Price Index
for All Urban Consumers (CPI-U), and not to health cost trend, which has been
rising at a much faster clip that the CPI-U, said Helen Morrison a principal
with Ernst & Young LLP, Washington.
means is that even plans with only a 70 percent actuarial value—a silver-tier
plan under the ACA—will reach the excise tax threshold soon after 2018,
depending on which geographic region they are in, she said Oct. 9 at a meeting
of the American Bar Association, Joint Committee on Employee Benefits.
in 2018, the ACA imposes a 40 percent excise tax on the cost of high-cost
health plans above a certain threshold. The tax has been dubbed the “Cadillac
will need to begin planning now, if they haven't already, to deal with the
reality of the excise tax, said Morrison.
The first step employers need to take is to collect data on their plans, before making any decisions about what methods or products to adopt to curb costs, Morrison said.
Dropping dependent coverage for spouses, for example, would seem intuitively to make sense as a tactic to lower plan costs, Morrison said.
Employers that exclude working spouses from coverage may save money in the short term by cutting the number of covered lives, but the long-term effect of this strategy is less clear, according to a study from the Employee Benefit Research Institute.
Wellness plans have gained in popularity, but the jury is still out on the degree to which they can lower plan costs, said Joanne L. Hustead, vice president and deputy leader of Segal Group Inc.'s National Health Compliance Practice in Washington. Employers may find that disease management will offer “the biggest bang for the buck,” Hustead said.
wellness strategies include culture change, such as demonstrating management
support for a healthy employee culture; behavioral modification, such as
providing incentive to promote health behaviors; increasing communications
about health; and health status metrics, such as biometric screening.
completely eliminating coverage is a possibility, to date, the vast majority of
large employers haven't terminated health-care coverage for full-time
employees, Morrison said. Some large employers may be holding off on this
decision while waiting to see if other companies drop coverage, she said.
some large companies have eliminated coverage for their part timers, such as
Wal-Mart Stores Inc., Target Corp. and Home Depot Inc.
There is no single “silver bullet” that will control costs, but there are many opportunities, Morrison said.
Excerpted from a story that ran in Pension & Benefits Daily (10/10/2014).
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